Business Fri Feb 29 2008

Half Acre's Magliaro Talks Hops Costs

Beer lovers, brace yourselves: thanks to bad weather in Europe and a reduction in crops here in the States, there's a severe shortage of hops, one of the key ingredients in beer. As a result, prices have skyrocketed &mdash as much as 600 percent for rarer cultivars.

The increased costs are squeezing smaller brewers in particular. I recently spoke with Gabriel Magliaro of fledgling Half Acre Beer about the situation.

Andrew: I know your beer is contract brewed in Wisconsin; is this bill being passed on to you by the brewery, or are you purchasing ingredients directly?

Magliaro: "Yes, this bill is being passed on to us by the brewery, and we're lucky that we're contract brewed right now because they have long standing relationships and a bit more buying power than we would have on our own. We're having to buy our entire year's worth of hops now because we need to insure that we can continue to brew our beer without compromising quality. Our brewer is asking us to help them out because they can't afford to absorb this kind of spending and are forced to buy this way. We have been actively searching for hops to buy on our own with the hope of buying for our Over Ale (Half Acre's planned second offering]) and beating the price coming down from our brewer, but have been either unable to find the necessary variety of hop or completely blown out of the water when we have. The Saaz hop that we use for the lager was generally found for about $5 a pound. I was just quoted $30 a pound for hop that aims to mimic its qualities."

Andrew: You're in the process of building a brewery here in Chicago. Will this delay the brewery construction, and by how long?

Magliaro: "This won't necessarily delay the construction of our brewery, it just scares the shit out of us that much more. Problems are inherent in any business and being flexible is something we'll have to get used to. However this specific shortage really hits a craft brewing company in a place that hurts. Our issues aren't unique in the industry -- we're just amongst the younger, more poor companies getting hit a time when having flexibility is tough. Hops are one of the biggest tools a brewer has to make craft beers great, and the most sought-after hops by small-scale brewers (Cascade, Centennial, Amarillo, Simcoe) are being sucked up in a frenzy."

Andrew: Has the city been cooperative in the construction process in terms of licensing and inspection, etc.?

Magliaro: "We're not at a place where the city has had the opportunity to be helpful or harmful — we're still looking for the location. There are some hopefuls right now, and we're prepared to lay it on the line in order to continue towards our goal, but we're going to have to get awfully creative."

Andrew: Beyond delaying the launch of Over Ale, will the shortage affect production of your Lager?

Magliaro: "The shortage will not affect the production of out Lager. We're having to go to great lengths to insure that doesn't happen — basically spend much more money than we can afford and stockpile in ways we normally wouldn't have to."

Andrew: Will prices for Lager go up?

Magliaro: "We're doing our best to not raise prices on our packaged beer, and taking the hit on our production increase because we don't want to scare off the good folks spending their hard earned cash on our beer. Our keg costs to bar owners may go up a few bucks, but that likely won't raise the price of a pint."

Andrew: Sam Adams recently announced they would be selling some of their hops supply to small breweries; any chance Half Acre will get in on that?

Magliaro: "You're right, Jim Koch took it upon himself to offer up 20,000 lbs. of hops from their personal stash to brewers in need. He also sold them at the same price he paid. It was a very generous act, and smart from a public relations perspective. He is no idiot, and it seems he really does have the best intentions for his fellow brewers. I've heard some horrible stories about brewing companies larger than Boston Beer Company who have actively took the opposite approach. As for us, we won't be brewing with any of Jim's hops. The specific hop varieties he was offering wouldn't help us out with our Lager or upcoming Ale. The idea of just grabbing them to stock up in case is appealing, but we're poor and those hops are intended to go to folks who need them now in order to keep their beers flowing and doors open.

"It's a great industry that is genuinely friendly (for the most part) amongst its members, so hops or no hops we're going to figure a way to make it work. We're lucky to have some great establishments and customers who continue to support us."

Things could get worse before they get better: a recent surge in wheat prices may squeeze breweries even further — and have a major effect on independent bakeries as well.

— Andrew Huff / Comments (0)