Farm Ireland

Sunday 22 April 2018

Craft brewers caught on the hop by global ingredients shortage

Most brewers have contracts with hop growers that protect them from sudden price surges, but future supply is at risk
Most brewers have contracts with hop growers that protect them from sudden price surges, but future supply is at risk

Nigel Hunt and Michael Hogan

Fans of craft beers could soon face higher bar bills as small, independent brewers face a potentially serious shortage of a vital ingredient: hops.

Last summer's hot and dry weather blighted the European hop harvest and strong demand for increasingly popular craft beers, which use a lot of hops, is putting small brewers' profit margins under pressure and forcing them to raise their prices.

Prices of some hop varieties have risen by up to 50pc, industry sources say, while industry insiders say others are up to five times more expensive or simply not available.

On his farm in Kent, not far from London, Tony Redsell has been growing hops since 1948 and some of the varieties he cultivates, strung along yarns supported by rows of high poles in traditional fashion, are more than 200 years old.

He sells most of his hops under contract to small brewers in the United States and his prices have risen by 20pc in the past three years. Last year the German crop was well down and American growers could not make up the difference, suggesting prices will go up again.

"The growth of craft brewing in the United States has boosted demand for English varieties," Redsell told Reuters.

"It's a good time to be a hop farmer."

Most brewers have contracts with hop growers that protect them from sudden price surges, but future supply is at risk.

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The scarcity may also get worse as multinationals such as Anheuser-Busch InBev and SABMiller buy up craft brands and ramp up their production.

"It's tough for brewers, especially brewers that don't have hop contracts or who were a little late to the contracting game," said Bill Manley, small batch product manager at Californian craft pioneer Sierra Nevada.

If you underestimate sales and need more hops - as can happen if a beer suddenly gets popular - "you have to go around and knock on doors like a neighbour trying to borrow a cup of sugar", he said.

Along with water, malt and yeast, hops are one of the main ingredients of beer.

Germany and the US are the two dominant hop growers, each accounting for one-third of world production.

But Germany's harvest shrunk by 27pc last summer, according to the International Hop Growers' Convention.

There were also sharp declines in other European producers such as the Czech Republic and Slovenia.

"There has been a considerable tightening of supplies on the European hop market after the major reduction in the 2015 harvest with a sharp increase in prices," said Stephan Barth of German-based global hop merchant the Barth Haas Group.

"Europe will need at least an average harvest in 2016 otherwise we could see serious supply shortages," he added.

Barth said some hop prices had already shot up by 35pc to 50pc depending on type since last summer.

So-called craft beers can use six times more hops than conventional lagers.

Big brewers do use hops but in smaller amounts. They also have more buying clout.

AB InBev "has a policy of long-term contracts and sufficient physical inventories in place to protect against the current shortage for our brewing operations", a spokeswoman said.

Hops often range in price from about $3 per pound to about $25 per pound, but extreme demand can push prices much higher. (Reuters)

Irish Independent