Well, about the time our NPR affiliate ran a locally-produced story about this (they've changed their website and it's not online), I started to get alarmed. A few facts worth considering:
- Cascades, the signature hop of the NW and one you find in at least half the beers brewed here, was selling at $1.70 a pound last year, when the last of a backlog was finally exhausted. A month ago they were selling at $10 a pound. The 1,000 acres of Cascades are 300-400 short--and no new acres are being planted.
- Hop supplies from around the world are down, thanks to a hailstorm in Slovenia and a poor crop in the Czech Republic. This will increase pressures on hop supplies coming from the US.
- Hop acreage is down from over 200,000 acres from the 80s into the early 90s to just 123,000 acres now. It takes three years for a hop vine to reach full production.
At the very least, beer is going to cost a lot more for craft brewers to brew: they can't easily substitute varieties, which will cause the supply of certain hops to spike. Where the bigs could take advantage of other types, craft brewers are going to have to bite the bullet and shell out. At the worst, breweries may have to experiment with different varieties and hope to approximate the beer's character. This will hurt bottling breweries more than brewpubs, where variability is embraced. Can you imagine the consequences of a beer like BridgePort IPA having to change its recipe? Oy.
If there's a silver lining for breweries, it's that this may force certain innovations--experimentation with new hop varieties, use of non-hop bittering adjuncts, new, low-hop styles. This would actually be a wonderful thing, but the cost may be high.
Brewing isn't a high-margin business. Thanks to the run on ethanol, barley production has lost acreage to corn, which is also driving price increases. Breweries will have to choose whether to cut margins even more or raise prices. If they cut prices, can they stay solvent? And if they raise prices, will they lose market share? Craft breweries will be at a competitive disadvantage to bigger breweries, which can absorb costs more easily. The result could be a downturn in the craft market, and a shakeout that kills off smaller or more unstable brewers. This happened a decade ago, and it was ugly.
I'll quit taking this so lightly and try to keep an eye on what's happening. Stay tuned.