Apr

9

What’s Up with these Price Increases?

One of the things we like about Flying Dog drinkers is that you like to voice your opinion and aren’t afraid to ask questions.  One of the questions that has been raised recently is, “Why does my Flying Dog beer cost more all of the sudden?”

Good question and I’ll try to answer it as best I can.

First, I’d like to first emphasize that although we have some degree of control over our pricing, but some of it depends on the independent distributor’s margin requirements and the retail/tax structure of a given state.  With that being the case, a price increase in one state could translate to $0.50 per case more per sixer, while in another it could be $2, even though we gave similar price increases to all of our distributors.  We structured our price increases to translate to $0.50-$1 more per 6-pack, but distributors and retailers are independent businesses and legally we have no control over their pricing.

OK, now to the meat of the question.  In the past 6 months, the price of malt and hops has increased dramatically worldwide and this is impacting ALL BREWERS GLOBALLY.  Because we, and most other craft brewers use more malt and hops in their beers relative to the bland, mass produced lagers, these prices have had a greater impact on brewers of flavorful beers.  In a nutshell it breaks down like this:

Malt

  • Crop failures due to weather conditions in major growing regions in the world (Australia’s 5 year drought, Europe’s rains last Summer) have reduced the supply of available brewing barley.
  • The price of malt has been so low that malting companies have been hesitant to build new plants, thus demand is currently outstripping supply (this is similar to why gas is so expensive in US.  Yes, some of it is the price of crude, but much of it is due to no new refineries having been built in US for last 20 years).
  • Agricultural commodities are going up in general due to global demand and low value of US dollar.
  • Biofuel demand is driving up the price of all grains.
  • Unfortunately, we don’t see this getting better anytime soon as the dollar is going to stay low, emerging nations will continue to adopt the western, grain based diet more and more, malting capacity will take years to be developed and to top it off Australia just had another horrible harvest.

Hops

Really, the only reason here is that there has been a global glut for decades, keeping prices so low that farmers have planted other crops or sold their farms.  In the last 20 years global hop acreage planted has fallen 50%, while beer consumption continues to go up. Demand has finally outstripped supply, and this has been exacerbated by crop failures in the last couple of years.  The hop prices should settle down in the next couple of years, although they won’t go back down to levels their previous levels.

Being a craft brewer who uses a large amount of both malt and hops in all of our beers, the price increases have dramatically affected how we manage our business and posed a difficult decision: Change recipes or raise prices?

We chose the latter because we believe in our beer and we believe that even with the recent prices increases, Flying Dog and many other craft beers remain to be a good bargain in the adult beverage industry. When compared to a good bottle of wine on a per ounce basis, the price of our beer is still quite reasonable.

We understand that this is a significant price increase and may not make sense on the surface to the end consumer, but it was a necessary move for us to merely stay in business.  By no means was it a decision driven by greed. Craft brewers need your support now more than ever if you value full
flavored beer.

I hope this has answered some of your questions.  For more information on the rising cost of malt and hops and how it is affecting the craft beer industry, I invite your you to a couple news articles that will give you a 3rd party perspective:

Story from SignOn San Diego

CNN Video

Hops Shortage documented by Fox News

[tags]flying dog, brewery, craft beer, pricing, increases[/tags]


Duane says:

Raging Bitch went up $2.00 per six pack at my local store. I see in your explanation that up to $1 is attributable to you. Is the extra dollar due to a middle man?

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>