Why is craft beer so expensive? Blame it on hops
If you've ever wondered why craft beer is so expensive, the hop flower — perhaps never more in demand by artisanal brewers than it is today — is a big reason why.
There just aren't enough of them out there — which is why Greenville, S.C., brewers like Brewery 85's Will McCameron finds himself scouring for hops, if he hasn't already locked himself into multiyear contracts with West Coast growers.
Just a decade ago, a pound of hops would sell for $3. Today, the cost for certain varieties can reach $20.
"We either have to eat the cost or pass it on to the consumer, and that's usually why beer prices go up, because hop prices go up," McCameron said.
The demand has spawned an industry of promise and uncertainty — and a need for expansion beyond the Pacific Northwest, where most of the nation's hops are cultivated.
"We're getting to the point now where our operations are at capacity," said Ann George, administrator of the Hop Growers of America organization based in Washington state. "They've reached critical mass."
Hops thrive best in the specific amount of daylight between the 35th and 55th parallels on either side of the equator.
In the northern hemisphere, Washington, Oregon and Idaho are chief producers, as are much of England and Germany. The picking season begins soon and will last through October, with short time frames to pick for different varieties. New Zealand and Australia produce more limited quantities.
Complex market for craft brewers
For decades, big brewers like Budweiser and Coors have used modest hops to impart the balance they want in making standard domestic beers.
American craft brewers have taken it further: Healthy doses of hops have become the chief agent for creating bold, "hoppy" India pale ales, which have garnered a cultish following in recent years.
For craft brewers to compete in an exploding industry — American craft represents nearly 10% of the nation's beer market and more than $34 billion economic impact — they must be creative.
Don Richardson, brewmaster and co-owner of Greenville's Quest Brewing, finds himself competing on a small scale amid a global demand since the U.S. produces more hops than any other country, and its crops are desired across the world.
At the outset, the company didn't contract for the hops it needed, creating uncertainty from month to month over whether Richardson would have the hops he needed to follow his recipes.
Quest recently canned its Belgian Pale Ale for store shelves across the state — but the Cascade hops that are primary in brewing it aren't under contract.
Richardson spends a significant portion of his time searching for spot sales of hops, hoping someone has overgrown or overbought.
He will buy them 500 pounds at a time, which will last a couple months until the next shortage.
Where Richardson will buy his hops in pelletized form, a mammoth craft brewer like California's Sierra Nevada in Mills River, N.C., uses its vast resources to store bales of whole-cone hops.
"This initial couple years is pretty tough," Richardson said. "I had to actually go out and start contacting other breweries."
By the end of this year, Richardson says, Quest will be under contract for certain hops, with more varieties under contract in 2015.
When Richardson was brewing a decade ago, a pound would cost $3 to $5, he says. Today, the minimum price is $8. For hard-to-find varieties such as Citra, which is in high demand, the price can be as much as $20 per pound, he said.
And the shortage of hops has changed what beer brewers can offer.
Because the demand for Citra hops is so high, the double IPA that Quest brewed was available for only a few weeks. Richardson said that once he secures a contract for Citra in January, the product will be a big seller.
At Brewery 85, owner McCameron said he's decided to specialize his beers using Centennial hops, figuring that focusing on one will provide security until more can be contracted.
"We try to stick to easier-to-find hops or hops that not everybody's paying attention to," McCameron said.
At the same time, McCameron said he contracted for hard-to-get Amarillo hops just in case.
Farmers dilemmas
In many cases, farmers don't know how or what to plant in an uncertain market that requires significant investment in limited regions.
Farmers in the Pacific Northwest have shifted the types of hops they grow — but the five years it can take for a hop plant to reach its potential necessitates calculated risks.
The appetite of craft beer drinkers can change quickly and craft brewers are endlessly experimenting.
Equipping a 300-acre field for harvesting on a large scale can cost $6 million, said George of the Hop Growers of America.
Where once hop farms were 70% alpha hops, the number has shifted so that aroma hops make up 65% of the farms, she said.
With that change has come a shift in the cost and availability of hops.
Aroma hops yield less than alpha crops. In fact, George said, hop farms have shifted to a model that has them harvesting half the yield for twice the price.
Meanwhile, she said, big beer companies have taken notice and are evaluating how they might take advantage of craft-inspired beers to cut into the share, creating more demand for hops.
"You've got the demand coming from both sides," George said.
The business of growing hops is expanding beyond the Pacific Northwest to just about anywhere the climate will allow, including the Great Lakes region and portions of the Northeast.
The demand has led to the cultivation of hop farms on the very fringe, to the 35th latitude where growers in the Blue Ridge Mountains are working to have hop plants take hold.
"This has really created an opportunity for growers in other parts of the U.S. to become part of hop production," George said.