As the Russia-Ukraine war continues, some craft breweries are bracing for higher barley prices.
Brooklyn Brewery’s CEO Eric Ottaway said the price of a six-pack increased by 50 cents to a dollar over the past year, and prices will go up by a “similar amount again before the end of the year.” The craft brewer, which sells lagers, porters, IPAs, and other beers in more than 30 countries, said it raised prices by 5% to 6% in February.
Russia and Ukraine produce 13% and 5% of the world’s barley, respectively, according to a report from Rabobank, a Dutch financial services company. Together, the two countries account for 30% of global exports, with most of the grain used for feed. Most US-based microbreweries don’t source their barley directly from Ukraine, but the grain market is global, said Ottaway. So a shortage in one area affects prices everywhere, he said.
Craft brewers may be particularly affected
The craft beer industry has grown rapidly over the past two decades during which thousands of new, independent breweries and brewpubs have opened—to date there are close to 9,000 in the US.
The disruption to barley exports could hit these small breweries particularly hard, said Bart Watson, the chief economist at Brewers Association. They use three to four times as much malt, often made from barley, per barrel as large brewers, he said. In addition, small brewers often don’t have long-term contracts for grains, he said.
That comes after US sales for craft breweries declined 9% in 2020, when restaurants and taprooms were closed during the pandemic.
Every element of beer production is more expensive now
The price of beer soared during the pandemic, reaching a 5.1% year-over-year increase in April 2020, according to the US Bureau of Labor Statistics. Prices fell as the pandemic eased up, but this year, beer prices inched back up to a 3.7% year-over-year increase in February.
Rabobank analysis estimates that over the past year, the total cost of producing beer in the US rose by 15%, largely due to rising energy costs and packaging materials, the latter which account for about 25% of the price of beer.
Even before the war, a barley shortage contributed to higher prices. Last year US barley production declined due to drought as well as a decrease in acreage cultivated. Ottaway said Brooklyn Brewery’s malt prices increased more than 30% between 2020 and 2021, as maltsters have been scrambling to find a supply from overseas. With regards to the potential for higher barley prices due to the Russia-Ukraine crisis, Ottaway said “it is likely not a question of if, but how bad it will be.”