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The Honolulu Advertiser
Posted on: Sunday, April 27, 2008

BEER PRICES
Beer taking bigger gulp out of your wallet

By Jerry Hirsch
Los Angeles Times

Hawaii news photo - The Honolulu Advertiser
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LOS ANGELES — Artist Jeff Foye savors the bitter flavor and floral aromas of a well-crafted beer. Lately, when the Los Angeles resident reaches for a brew he also gets the unpleasant sensation of rising prices.

A worldwide shortage of hops — a key ingredient of the pale ales Foye likes so much — and rising prices of malted barley have pushed up the cost of imbibing a tall cold one.

These days, he's paying $9.99 a six-pack, about 40 percent more than a year ago.

Add beer to a growing list of suddenly higher prices for what many consider basic foods: bread, coffee and pizza.

"It is a big hit," Foye said over a microbrew last week at the bar of Beachwood BBQ in Seal Beach, Calif. He doesn't drink enough beer to make it a "budget buster," but still finds it "irksome."

"It's like gas prices; what are you going to do about it?" he said.

After barely budging for several years, beer prices started to inch up in the second half of last year and are now rising at about a 4 percent annual rate, according to government statistics.

It's showing up in what brewers and distributors are charging for domestic and imported beer, said Ken Hollingswood, owner of Hollingswood Delicatessen, in Orange. He's had to raise the price of better domestic brews by about 15 percent and European beer by 20 percent.

"Those are big increases, and I don't think we have seen the end of it yet," Hollingswood said.

Prices of microbrews are rising faster than those of the mass-produced beers. That's because small brewers are less likely to hedge expenses with advance purchases of barley and hops than Anheuser-Busch and other giants that control most of the market.

But even the big brewers aren't immune.

"Like all brewers, we are experiencing cost increases due to the rising prices of brewing ingredients," said Anheuser-Busch spokeswoman Maureen Roth. She said the nation's largest brewer has "aggressive cost savings programs in place throughout the company designed to partially offset rising commodity costs."

Two ingredients — malted barley and hops — are behind much of the price increases. Hops give beer its distinct flavor. Some varieties are used to bitter the drink. Others impart its floral aromas. Most commercially grown domestic hops come from Washington, Oregon and Idaho.

After water, malted barely is the next biggest ingredient in beer. Barley prices have risen because of worldwide demand for grains. Philip Sutton, owner of Skyscraper Brewing Co., a small brewery in El Monte, Calif., said the price of a 50-pound bag of malted barley has jumped 57 percent from a year ago to $22.

Hops prices are soaring even more. Sutton paid $3.40 to $4.70 a pound for hops a year ago. The least expensive he has found this year was $12.63 a pound, and he's paid all the way up to $22.45. But that's only if he can find them.

"The hops that we like to use just aren't available," Sutton said. That has forced him to substitute other hops in some of his beers "and that makes a different beer. It's still good, but isn't what we would ideally have," said Sutton, who has raised his prices 20 percent to 30 percent, depending on the brew.

The hops shortage is hitting small but fast-growing craft brewers that have become the most dynamic part of the U.S. beer market. That segment of the market accounts for less than 4 percent of U.S. beer production but uses almost 10 percent of the hops, according to industry statistics.

Microbrews are where most beer innovation is taking place, said Gabriel Gordon, owner of Beachwood BBQ.

At any one time he sells 23 brews on tap and another 45 in bottles. And most need their hops, Gordon said as he sampled a "double hop" India pale ale.

Brewers are charging Gordon 20 percent to 40 percent more for their beer, so he's raised prices about 50 cents a glass to $6 or $6.50.

"I am not looking to get rich," Gordon said. He would prefer to limit his price increases and "have my repeat customers walk away satisfied rather than feel like they were gouged."