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In-Depth: Craft beer to cost more in 2022

Changes in aluminum industry lead to higher prices
Posted at 6:09 AM, Dec 08, 2021
and last updated 2021-12-08 10:24:27-05

SAN DIEGO (KGTV) - Craft breweries in San Diego say they'll have to raise prices on cans of beer because of changes in the aluminum industry.

According to several breweries, Ball Corporation, the nation's largest aluminum can manufacturer, sent an email to customers this month announcing a "customer reduction strategy."

Ball reportedly plans to increase the minimum purchase from one truckload to five, meaning companies will have to order about a million cans at a time, all with the same label. Ball also plans to raise prices on each can by as much as 50%. And they will no longer keep breweries' extra can inventory in warehouses.

"If you're a small brewery and you gotta buy (that much of ) one can, you gotta lay out around $150,000 to buy those five trucks," explains Mike Hess, the Owner of Hess Brewing. "There are maybe two breweries in San Diego that have that kind of capital."

"When is this ever going to end," wonders Karl Bordine, the Director of Finance at Lost Abbey/Port Brewing. "We can't use Ball as a supplier anymore."

Brewers across San Diego say this could result in a price increase by as much as six-pack starting in the next few months.

Ball Corporation didn't respond to multiple calls and emails from ABC 10News about these changes.

But the Brewers Association sent a letter to its members detailing all of the changes. The letter quoted Ball CEO John Hayes as saying the company is moving towards "long-term contracts for committed volume with effective cost recovery mechanisms" during an earnings call with investors.

"Quite honestly, I'm sad and anxious," says Virginia Morrison, the San Diego Brewers Guild president. The Guild represents around 150 craft breweries across San Diego County.

"I don't know that some of our members are going to be able to accommodate that sort of increase."

Morrison is also the CEO of Second Chance Beer and sits on the Board of the Brewers Association. She says this change is the latest challenge to the industry, which struggled to stay afloat during the Pandemic. In addition to shut-downs, they dealt with supply-chain shortages, labor issues, and more.

A 2019 report by the Brewers Guild and Cal State University San Marcos found that the craft brewing industry has an annual economic output of $1.2 billion in San Diego. It has grown by 34% since 2016.

But these changes from Ball, combined with other lingering effects of the Pandemic, put that growth in jeopardy.

"This is kind of just another nail in the proverbial coffin," says Morrison.

Small-to-medium-sized breweries have a few options if they can't meet Ball's new purchasing rules. But all of them come with drawbacks.

They can switch to a new provider if that company has enough can inventory to accept new clients. Because of the aluminum shortage around the world, that's unlikely.

A brewery can order blank cans, often called "brights" or "shiners." But if they do that, they need to pay more money for labels, in addition to the cost of a label machine that can apply them to the cans and the additional cost of employees to run it.

They can switch to bottles instead of cans. But many breweries say consumers don't want bottles anymore.

"Cans are nicer for the beach. They're nicer for a pool. Nicer for the backyard," says Bordine.

In addition to the price increase, Morrison says many breweries may decide it's not cost-effective to produce as many varieties or special-release beers. She thinks some may cut back and only make their top-selling beers.

Still, she's confident the industry will find a way to survive.

"You know what craft brewers do? We pivot, and we innovate, and we figure it out," says Morrison.

"We're just trying to stay in business, keep the lights on and keep doing a good thing," adds Hess. "Hopefully, people will spend at breweries where they make a quality product and where they love the message of the brewery.

"We're still making great beer," says Bordine. "There's a bright side. All this negativity, we're still making great beer."