Craft beer drinkers are used to paying a bit of a premium for their IPAs and stouts, but they may have to dig even deeper in the coming months.
Barley grown in Canada, which is a major supplier of the key ingredient, is coming off a terrible year, thanks to a wet, cold winter. That’s happening as stockpiles near a 35-year low, meaning wholesale prices are about to soar.
Exactly how that will impact consumers, though, is hard to estimate. Craft brewers use roughly five times more malt (made from barley) than larger brewers to help achieve the richer taste of craft beer. Traditional brewers spend about 5 cents on malt for a 12-ounce beer, while craft brewers spend 25 cents or more.
Government forecasters in Canada say the price of barley could raise as much as 21% per metric ton this year compared to 2017. Using rough back-of-envelope math, that’s an extra five cents or so per bottle for craft brewers. Some beer makers might absorb that, while others could increase prices.
Canadian farmers actually sowed more barley than ever this year, but the wet weather affected the quality, germinating it in the field, making it more difficult to turn into malt. The barley that can’t be converted to malt becomes feed for farm animals.
Canada, of course, isn’t the only country that makes barley for brewers, but a heat wave and drought in Europe this year has impacted crops there, with some yields as much as 40% below average. (The price of French barley jumped 35% in just four months.)
The timing of a potential price increase couldn’t be worse for craft brewers. The industry is still growing, but it has slowed significantly. Year-end sales in 2017 came in at $26 billion and craft beer production volumes were up 5%, far lower than a few years ago.