Disaster is brewing in the beer world. Brewers across the U.S. are simultaneously facing several seriously grave issues: an unprecedented worldwide shortage of hops, an unusually short supply of malted barley, an enormous increase in transport expenses due to the rise in fuel prices, and a severely devalued dollar.

Since last summer, the hops crisis has been at the very top of the list of woes. American brewers are dealing with a 10- to 15-percent shortfall in the worldwide supply of hops, largely caused by farmers cutting back on the crop. Recent yields diminished by rain and drought added to the shortage.

Meanwhile, a massive warehouse fire in a facility in the heart of Washington state’s hop-growing region, Yakima Valley, made things even worse, striking a blow to the beer world that’s still rippling across the market. In early October 2007, fire destroyed a 40,000-square-foot warehouse operated by hop company S.S. Steiner. An estimated four percent of the U.S. hop crop was lost at a cost of between $3.5 million and $4 million.

Breweries of all sizes — from the big beer behemoths to the tiny, independently run brew pubs — made a mad dash for basic raw materials. Some panicky breweries ordered and hoarded as many hops as they could secure, while others were essentially left with empty supply rooms, unable to make any beer at all.

The craft-beer industry is at the edge of turmoil, as high expenses cut into profits and threaten the closure of several microbreweries and brew pubs.

What are hops?

Soft, subtle, and deceptively powerful, hops are bitter herbs used almost exclusively in the making of beer. As early as the eighth century, brewers in Europe and elsewhere used a number of herbs and spices to balance beer’s natural sweetness, a result of the sugars produced by the starches of malted barley and other grains during the mashing process.

There’s hop flavor in every beer, even if only slightly. Even cans of Schlitz — an extremely pale, lightly flavored American lager — boast “just the kiss of the hops” on the labels.

While all hops add bitterness to some degree, some are better at the bitterness game than others. Newer varieties, bred mostly in the American Northwest and Great Britain, are like “super hops,” with higher alpha acid (or humulone) — the resin that is the main contributor in bittering beer.

Commercial breweries and homebrewers often refer to a system of measuring bitterness devised by brewing scientists. International Bitterness Units (IBUs) are based on a scale that expresses bitterness potential. One IBU is one part per million of isomerized alpha acid.

When hops are boiled in wort (unfermented beer) for an hour or more, the resins produce a bitterness that is a perfect counterpoint to barley malt sweetness. If the brewer tosses in hops a few minutes before the end of the boil, then an agreeable, floral flavor and aroma emerges in the beer. The condition of the hops, their IBUs, the length of time they’re in the boil, and the pH of the wort affect how well they’ll bitter a brew and add flavor or aroma. It’s tricky stuff.

Expensive and Unavailable

“Prices for hops have been pretty flat since we started the business,” says Ed Falkenstein, co-owner of the local microbrewery Palmetto Brewing Company. “Before the micro revolution, when 98 percent of the beer market was mass-produced beer, the big brewers only used just a touch of hops. They’d just pass a few across the brew kettle. By the mid ’90s, the demand was higher, and a lot of farmers in Washington went back to growing more hops.”

In late 1993, Falkenstein and Louis Bruce founded Palmetto, South Carolina’s first independent brewing company since Prohibition.

They built and arranged an immaculate production warehouse on Huger Street. From their first batch through today, they’ve used adjuncts (such as rice, corn sugars, or other ingredients), and no preservatives. By 1998, they added a pale lager — brewed with a healthy dose of Czech and German aroma hops — to the lineup as well.

“Getting hops used to be like going to the grocery store and saying, ‘Give me a few pounds of this and a few pounds of that.’ It’s different now,” Falkenstein says. “Because of the contacts we’ve made — and the fact that we’ve been buying from the same guys for 15 years — we did get some warning that things were going to get tight. We actually bought a lot of hops last year. If we hadn’t bought all those, we wouldn’t be brewing right now.

“There is an uncertainty for years to come,” he adds. “We’re already trying to negotiate our contract for the coming years, and it’s getting kind of scary. Some guys think they can just make their beers without as many hops, but that really changes the complexion of your offering. Last fall, the prices went from $3.50 or $5 a pound to over $20 overnight. I wish I could have bought a few pounds of Columbus hops for $30 a pound when my supplier offered them to me. At the time, I thought that was outrageous. Now, I’m wishing I bought all I could. It’s like a distributor telling a chef, ‘No basil, oregano, or black pepper for you this year!’ Imagine that.”

The New Kids Stay Afloat

The local brewing company hit hardest by the hops crisis is also the youngest. Fortunately, the newly opened Coast Brewing Company, a cozy microbrewery situated at the far end of the Noisette industrial neighborhood in North Charleston, is beaten up but not defeated.


“We’ve had to adjust recipes and scramble like mad,” says co-owner David Merritt. “I’m not against altering recipes a bit, as long as it’s in a reasonable realm. If it makes the beer better, then great. If it makes it worse, then hell no! That’s my theory. Craft brewing in general is all about adaptability, flexibility, and taking what you can find and making something great with it.”

Coast recently introduced a half-dozen big-flavored ales, including a Belgian Tripel, a stout, a crisp 32/50 Kölsch, an intensely malty Chocolate Rye Brown ale, and a smoky, sweet, ruby-colored Scotch Ale.

“Coast is more about balance than anything,” says Merritt, who worked previously at Southend Brewery and Palmetto Brewing Company. “We want to make beer that’s drinkable all the time, year-round. I want my malt to be balanced with the hops in every glass.”

The highly-hopped, full-bodied, Hop Art I.P.A (short for “India Pale Ale”) is Coast’s signature beer. Copper in color, it’s certainly the hoppiest and best conditioned of their lineup. Unfortunately, without a healthy supply of hops at hand, Coast’s main product would be impossible to brew.

While Coast’s mechanical operation is smaller than those of Southend and Palmetto, they aim for the biggest hop character in town with their pale ale. “Our I.P.A. is an aggressively hoppy beer,” Merritt says. “We use a lot of hops for such a small system — about 11 pounds per batch [25 kegs of beer]. Since we use so many hops, we actually can’t make a full 15-barrel batch at once.”

Small breweries may not have the brewing capacity to produce huge amounts of beer at once, but their size allows much more flexibility. Brewers like Merritt can play around with their recipes, adding various types of extra hops at different times, and in different amounts. But such experimentation can be challenging.

“The hop oils and proteins cling together on the top of the wort during fermentation and create a foam dome that blows off [drains away] during the process,” Merritt says. “We use so many hops that we lose several kegs’ worth of beer during the process — all the way up to kegging. We lose more beer during the making of our I.P.A. than the others.”

Merritt and his wife/co-brewer Jaime Tenny officially brewed their first batch of beer last September. “It was the worst possible time to start up a small craft brewery,” laughs Tenny, who worked early last year with the successful Pop the Cap campaign to legalize high gravity beer in South Carolina.

Merritt and Tenny make it their mission to use “alternative means to brew unique beer,” choosing organic and fresh local ingredients. They heat their kettles with biodiesel in an energy-efficient process. Currently, the organic hops are almost impossible to find.

“We had been ordering organic hops for months from East Coast Brewing Supply with no problem,” says Tenny. “Then, one day they just said, ‘We don’t have any.'”

She adds, “There are only five varieties of organic hops available to us. We’re getting very low on our supply of organic hops now.”

As of last month, Coast made the painful decision to abandon their policy of using only organic ingredients. They hope it’s merely a temporary survival tactic.


There’s a Barley Problem, Too

Barley malt is the primary raw ingredient in beer. While some hop varieties have tripled in price in the last six months, the average price for barley has more than doubled in the past two years.

Climate change may be one factor. An Australian drought has cut that country’s barley production in half. Many beer producers in Australia, Europe, and Asia are looking to the U.S. and Canada to make up for those shortfalls, turning both barley and hops into global commodities, which drives up prices and further reduces the supply.

The barley market consists of two major segments: the feed barley market and the malting barley market. In order to be selected for malting barley, the grain must meet certain quality standards. If it is not selected for malting, the barley is used for livestock feed.

Charlie Papazian, the founder of the Association of Brewers and the president of the newly formed Brewers Association, is one of the most prominent and recognized names in the world of beer and brewing. He recently attributed the barley prices to ethanol subsidies that have raised the price of corn, the main ingredient in the alternative fuel. As a result, farmers have switched to barley for livestock feed, which has pushed up prices.

“I think the higher barley prices are just as significant as the hops crisis,” says Falkenstein. “There’s enough supply to go around, but the prices are much higher. Barley is twice as expensive as it was a few years ago.”

Brewmeister Ahren Warf of the Southend Brewery & Smokehouse on East Bay Street agrees that barley prices are as much a threat to the brewing world as anything else.

“Grain is being pulled in so many directions these days,” Warf says. “It’s the advent of biofuel, farmers switching crops, less available acreage, increased development of residential areas. I guess the world is changing. If the beer industry is going to keep up, it’ll have to adjust.”

The higher hop and barley prices have led many microbreweries and brewpubs to raise their own prices from 25 to 75 cents on a draft pint and to $1-2 or more on a six-pack. Some suppliers estimate as many as 20 percent of recently opened brewpubs and microbreweries could fail in the interim.

Southend has brewed without disruption — and without raising their prices at the bar. Although the price increase for the raw ingredients is significantly higher this year, Southend’s ales still sell for $4 for each 16-ounce pint during regular hours.

When Merritt and Tenny started brewing at Coast, they paid $8.99 per pound for Cascade hop pellets and $14.99 for the high alpha Pacific Gems pellets. Now, the same varieties are available for between $26 and $32 — more than double the initial price. That temporarily translates into about two or three dollars more for the 22-ounce bottle of Coast beer, and between 50 cents and a buck for a draft pint.

Up until a few years ago, a six-pack of Palmetto generally went for $6.99 to $7.99 at shops around the Lowcountry. This year, the prices now range from $8.25 to $8.99.

“Energy is up and freight is just outrageous,” Falkenstein says. “We buy by the truckload. What used to cost $500 to ship directly from Washington or Wisconsin in our early days costs close to $2,000 now. Don’t get me started on why we don’t consider making changes with energy and conservation in this country.”


Will Hops Make a Comeback?

Despite the tangle of troubles, there is good news in the beer world. While mass-produced American beer sales are flat, the sale of craft-brewed beer is up. The Brewers Association reported in February that the estimated amount of beer sold by independent craft brewers increased by 12 percent in 2007.

“Since 2004, dollar sales by craft brewers have increased 58 percent,” says Paul Gatza, director of the Brewers Association. “The strength of this correlates with the American trend of buying local products and a preference for more flavorful foods and beers.”

Now that hop prices are high, they will surely become an inviting crop for farmers in the Northwest and elsewhere. Unfortunately, it takes three years for hop crops to fully mature, so the shortage will continue for a little while longer at least.

“Sure, it takes three years before they really mature, but they can harvest the crops a bit after a year,” assures Falkenstein. “With the prices so high, I bet that the farmers will respond pretty fast.”

Merritt agrees. “Back in the 1990s, there was a surplus, and there were too many varieties of hops,” he says. “The prices were very low. Many farmers decided to switch to something more profitable, like corn. It’s taken this much time for it to catch up, so now it’s on the rebound. They’re trying to increase the acreage for hop production, but it will take three years to really catch back up.”

In an unusually generous move, the Boston Beer Co., makers of Samuel Adams and the largest American microbrewery, recently released 40,000 pounds of hops from its warehouses for a lottery sale, a move that could save some small breweries.

If the production of hops continues to increase over the next year to meet demand and weather cooperates, prices could start to even out as soon as 2009. The demand for beer should remain healthy, despite a spike in prices this year at the supermarkets and bars. In the meantime, local brewers are confident they’ll survive — one way or another, hoppy or just mildly hoppy.

“Part of the craft of brewing is in experimenting with different things,” says Falkenstein. “If you went to a fine restaurant and ordered a dish, then went back and ordered it again three months later, it might be slightly different because you’re allowing the chef an interpretation — unlike McDonald’s, where a Big Mac is expected to be a Big Mac.

“In craft brewing, drinkers allow the brewers to reinterpret things. There is flexibility.”

Some local hoppy offerings

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