The Hops Story
Greetings,
Supply and demand is an interesting phenomenon. Essentially the concept revolves around the fact that the less there is of anything, the higher the demand and the higher the demand, the higher the cost. As I understand it, this is the essence of a market economy.
Over the last two months, Brewers worldwide have “suddenly” been faced with a shortage of hops. This has created an increased demand, to cover brewing requirements over the next twelve months or so, and has caused the price of hops to rise, in some cases five or ten times what they were last year. Naturally, the producers and their agents, all good upstanding capitalists, have insisted on maintaining their profit margins.
This leaves brewers in an interesting position. They can either follow suit and raise prices accordingly, or they can watch their profit margin shrink until it is only one or two percent above production costs.
As I have followed the situation, in the media, online, and after talking to a number of brewers here in the United States, the following has become abundantly clear. Those who planned ahead, and had the capital to invest in hop futures, will be least affected by the situation. Amongst these lucky folks are the massive international brewing operations of Anheuser-Busch, Coors, Interbev, and SAB Miller. National and regional North American and European brewers will also feel the pinch, if they did not pay attention to their hop agents last year. (Make no mistake about it; this hop shortage is not a big surprise, especially after the massive destruction of hops stored in a warehouse in the state of Washington that burned to the ground last year.) The most affected will be small brewers who package their products for distribution. Brewpubs will also feel the pinch, although the packaging and distribution costs are less of a problem. And what does all this mean for the consumer? It will mean that all commercially produced beers will become more expensive.
Will this mean that there will be less beer consumed? Will this mean that homebrewing will begin to become more and more popular? Will mature beer drinkers continue the trend toward wine and spirits? Or will it be, as in the case of petroleum products, the consumer will just grin and bear it?
Six months from now, I’m going to look back at the following answers: No — No — Yes — Yes.
Cheers!
Peter LaFrance.
( peter.lafrance@beerbasics.com ).
