A Disaster Brewing
Hops shortage squeezes local-beer makers and drinkers
By Lee Nichols, Fri., March 21, 2008
There's nothing like a shortage to send people into a panic. Energy shortages. Food shortages. Water shortages. Wars have been fought over such scarcities.
Now here's a new one to send a chill down your spine: We are currently in the middle of a worldwide shortage of hops.
Okay, maybe the chill wasn't that great. If not, then you're probably not a lover of craft beer. But for those of us who are, the news that the world's hop supplies are severely limited can cause us to curl up in a ball and cry. People in this latter group understand that this is serious business. People in the former group, on the other hand, may be asking: "What's a hop?"
Here's a little Beer 101 for you: Hops – the female flowers of the hop plant (Humulus lupulus) – are one of the key ingredients in beer, along with malted barley, yeast, and water. Different hops serve different purposes, including stability, flavoring, and aroma in brewing. Most notably, they add bitterness to the taste of beer, helping to balance the sweetness of malt. In America, they are grown principally in the Yakima Valley of the Pacific Northwest. Germany, the Czech Republic, Australia, and England are other major hop-growing regions.
Different strains of hops create varying flavor profiles. This is a factor of great importance to all brewers but especially so to craft brewers and beer snobs (a term I use with great affection, because I am one). While there's really not a wide flavor spectrum across the Budweiser-Miller-Coors landscape, the world of small brewers is quite different – their brews range from dark stouts to smooth lagers to bitter ales, so not just any hops will do.
Scrambling for Hops
Austin is a town that loves its craft beers. Beer bars like the Ginger Man, Draught House, and Flying Saucer offer dozens, even hundreds, of options. The first legal brewpub in Texas was located here (God bless the dearly departed Waterloo Brewing Company), and successors such as North by Northwest are still plugging away. And quality microbrewers such as Live Oak and Independence Brewing Co. are building strong and well-deserved reputations here, as are near-Austin breweries such as Real Ale (Blanco), Saint Arnold (Houston), and the fabled Spoetzl (Shiner). While we haven't quite reached the level of beervana found in, say, Portland or Denver, you can still bet a hop shortage will cause pain in this city, in terms of both variety and price.
"It certainly sent us scrambling," says Brock Wagner, founder of Houston's Saint Arnold Brewing Co. "We thought, originally, that we were in good shape, because we've actually written hop contracts in the past. But we write them sort of midyear to midyear, and this year we got caught realizing, 'Oh dear, our contracts all end summer of 2008, and we don't have any hops secured for the second half of 2008. So we kind of had to scramble around to secure them. The end result was we've been able to get all of our flavor and aroma hops, enough of those so that we don't have to change our recipes for those hops. Our bittering hops – the hops we add early in the boil, which pretty much just add bitterness and don't add much in the way of flavor – we have had to alter those for several of our recipes."
Wagner nailed down those hops by buying up what he needed and putting them in storage – rather than buying 1,000 pounds each month, as some past contracts allowed, he grabbed his entire supply for a year – something he says cost him "a big chunk of change." Other brewers have done the same: Chip McElroy of Austin's Live Oak Brewing Co. says: "We spent all our money on hops, at five times the normal price. That really makes a dent. We'd like to buy some more kegs, but we can't.
Smaller operations such as brewpubs don't even have that luxury. "I don't have the hops of my choice," says Brian Peters, brewmaster at Uncle Billy's Brew & Que on the Barton Springs restaurant row. Unlike bigger (but still "micro") brewers that have contracts, "small brewers like myself buy off the shelf. Basically we just call up a hop broker, and we buy whatever they've got lying around, and they usually have whatever we need. And now I can't get any of the classic, citrusy hops that are real popular with IPAs [India pale ale, a very hop-heavy style]," such as the Columbus, Cascade, and Centennial strains. "I'm trying hops I've never used before," he says. "We're going to have to get out of our hop comfort zone."
The Perfect Storm
So what precipitated this crisis? "It's not just one thing; it's a whole bunch of things that came together at one time," says Charles Culp, the hop buyer for Austin Homebrew Supply. "For years, we've had low prices. Such low prices that these brokers would stockpile all these hops that haven't been sold – we're talking through the Nineties – and slowly started using them toward the early Nineties, when we started having a surge in craft beer. And then there was a lull, and then we started getting a surge at the end of the Nineties, so demand has pretty much gone through that stockpile." Those low prices also caused farmers to pull up their hop vines and try more profitable crops.
"Put that with the fact that several other hop-producing countries have had bad crops because of atmospheric problems, whether it be floods in England or drought in Central Europe, and the ultimate big player is Australia. We don't get much from Australia, but all the brewers in Central Asia do. So they had a really bad year, a really dry year, so suddenly everybody is needing hops." The obvious metaphor, more than one brewer said, is that it's a "perfect storm" of bad factors. (And it's exacerbated by the fact that there is also a bit of a shortage in malt, although not as severe as that of hops, a problem Peters says is caused by the market drive for ethanol, which causes grain farmers to plant corn rather than barley.)
Also obvious is the effect a shortage will have on prices. Hop prices have gone up anywhere from 100% to 400%. Culp says that where he used to be able to get hops at under $5 per pound, now they can cost anywhere from $15 to $30, even as high as $60 for certain strains. "Cascade hops," notes Wagner, "can't be bought at any price."
You can bet that will trickle down to consumers. On his home-brew patrons, "We had to limit hop sales," Culp says. "We only allow 4 ounces per variety, per order." To provide some context, a 5-gallon batch of beer requires about an ounce of hops for a hefeweizen (a light wheat beer), 2 to 3 ounces for a pale or amber ale, and three or four for an IPA.
Just plain old drinkers will feel the effect, too.
Now, if you're a lover of, say, Budweiser or Miller Lite, fear not. The rich never suffer in times of famine, and that's true among brewers, too. The major brewers have the financial leverage to ensure that their hop needs will be met, so don't expect the Silver Bullet to suddenly vanish from the shelves or become prohibitively expensive.
But patrons of Uncle Billy's will notice that the price of its IPA has gone up 50 cents per glass, and 25-cent across-the-board increases are being contemplated. Real Ale fans have seen a rise of 50 cents per six-pack. Wagner says Saint Arnold is up about $1.50 per case. And McElroy says Austin's Live Oak Brewing has had to raise the price of their brews – which are only sold in kegs – about 14%. "I'm trying to hold the line, and I think most people are," Peters says. "At least not overreact, pricewise."
Fortunately, at this point anyway, customer loyalty offsets any threat to business for small brewers, so reduced sales haven't been a problem. "I'd say we're a little bit concerned about that," says Erik Ogershok, co-head brewer at Real Ale Brewing Co. out in Blanco, "but I don't think we're terribly concerned. I think that the person who is a craft-brew drinker is going to be willing to pay for the quality that they get and the flavor. It's not the same as someone who is buying a 12-pack of Natural Light, or a 30-pack, because they're out there to drink as much beer as they can. The people who are drinking the craft brews typically want to savor the flavor, and it's an important part of their drinking experience."
Culp says the same is true of his brew-your-own customers. "It affects it somewhat, but we just have to increase our prices and keep going," he says. "People don't seem to stop brewing."
And brewpubs have the added benefit of not being completely dependent on beer sales. "North by Northwest isn't going to be as hard-hit as some of the other breweries," says Ty Phelps, head brewer for that restaurant. "Our cost structure is a little different than, say, a brewery that sells their beer in six-packs at the store. Their [ingredient] costs are a lot bigger part of the overall picture for them, so that's going to hurt them a lot more. Us, it's not as big a part ... for us, it's the restaurant and bartenders, things like that. We have different costs than they do, so ingredient costs are a lower percentage."
Hops Hit Home
So the real pain for craft-brew lovers will be not so much in price but in availability. Beers they've fallen in love with may suddenly become scarce. As Peters said, brewers are getting out of their "hop comfort zone" and are being forced to try new things. This poses different types of problems depending on what type of brewery you have. As Phelps noted above, retail brewers and brewpubs really are very different facets of the brewing industry.
"Live Oak and Real Ale ... have recipes that they don't want to change," says Uncle Billy's Peters. "As a pub brewer, I'm able to change my recipes and come out with basically almost anything I feel like brewing. But when you get to a point where you're bottling and your product's been the same for 10 years, you're really not interested in going back to the drawing board."
In fact, some brewers would rather cut back or even kill off a brand that depends on a certain hop style than change it and risk ruining the reputation of that brand. A hop is not a hop is not a hop. "A hop that I would put in my pilsner does no good in my pale ale," Phelps says, noting that his Kodiak IPA, a popular NXNW brew often sold in bottles, will appear far less frequently at the restaurant.
"Some of the hop varieties that we want we can't get," says Live Oak's McElroy. "The effect that it's had on us in terms of the beer that we make is that one of our beers, the Liberation Ale [an IPA], which has sort of a signature Cascade dry-hopping ["dry-hopping" is a brewing technique] character to it, we can't get those Cascade hops. So we used to make that beer seasonally, and so we're going to make it seasonal again, even though it's superpopular. We felt like keeping the integrity of that beer was more important, and we're going to make a substitute, but we're not going to call it Liberation Ale. We're making an IPA, and we're using a different kind of hop. We're going to call it IPA, and it's fantastic, but we didn't want to call it Liberation Ale."
The real crunch might be on new brewers, says Josh Wilson of Draught House, a beer bar in Central Austin that features its own brews on Thursday nights. "Americans have been extremely spoiled," Wilson says. "I could pick up a catalog ... and pick from 30 to 40 varieties at a very low price that were sitting up there in cold storage that we could play with. Some of these aroma varieties will go away because the yield on some of them is not as great, and if you're a hop farmer ... you may not be interested in growing a lot of the boutique varieties that craft brewers and craft-beer drinkers like.
"It's definitely affecting me. I like to experiment a lot, and luckily I've been around for a while, so I've had a chance to really play around with a lot of hops. But I think that somebody that's just starting to get into brewing would really have a hard time, because they don't know what to commit to. If you're going to try and buy hops, you may be forced into a contract. I've been doing yearly contracts prior to now ... but [I've had to switch to] a different supplier that I've never contracted with before, and they said, 'Yeah, we might be able to squeeze you in, but you have to do a five-year contract,' which I've never done. But if you're a new brewer and you weren't sure both what your needs are going to be in terms of pounds, and also in terms of how much you love a particular variety, that could be pretty scary to commit to five years' worth of it."
Try not to despair, beer lovers. This problem likely won't last forever. Now that prices are high, hops will again become an inviting crop. But hops are not a quick payoff – it takes three years for hops to mature, so the shortage will at least be moderately long-term. One bit of good news: The Boston Beer Co. – makers of Samuel Adams beers and the biggest of America's microbrewers – released 40,000 pounds of hops from its warehouses for sale, a move that could save some of its small-brewing colleagues.
Until all this passes, you'll be paying more at the pump, as it were ... and to grab another cliché, you'll be crying in your beer. But buck up: Once planting starts again and competition goes up, prices will come down. But perhaps not all the way down.
"Prices are going to stay higher," says Uncle Billy's Peters, "because I believe the price was always way too low. Now a fair market price for hops I think will settle somewhere between $10 and $15 per pound. And that's fine, but right now it's gone up from $5 a pound to $25 a pound."
"The feeling amongst most craft brewers is that we're perfectly happy to pay hop farmers a good price," says Real Ale's Ogershok, "because the price was artificially low for a number of years. ... We're hoping the price will return to a normal level, but it will be a new normal level. And we're happy to pay for our ingredients, but we're paying four times what we were paying in the past, and we're hoping not to do that for the life of the brewery."
