Is the price of beer on the market going up or down?  Some recent trends are sending the price of beer into strange waters.  The price of metals used in cans and kegs has gone up.  Craft beers have become serious competitors to stock beers.  And hops are being affected by everything from ethanol to weather. 

As a result of the popularity of craft beers, large beer companies are acquiring small craft beer companies.  These beers can then be mass marketed as craft beers and the only thing that signals their true owner might be a small stamp on the bottom of the carton.  As a result of this competition and reorganizing of large beer companies, these large companies are decreasing production of their mainline stock beers.  

Meanwhile, beer consumption continues to grow, although most of the growth is in the craft beer area.  This growth is not only seen in binging, but in fine dining at brewpubs, microbreweries and the like.  Since craft beers are sold for higher prices and the decreased production of stock beers is decreasing the supply, the overall effect of the craft beer phenomenon is a rise in the price of beer across the board.  Add to this the other factors.

The price of metal is going up due to the incredible demand for metal and other commodities in China.  This is why copper pipes in houses and air conditioners are being stolen and one of the reasons oil prices keep rising.  This affects the price of beer through kegs and cans.  Once again, a factor that raises beer prices.

The third big reason for a rise in beer prices is the situation with hops and barley malt.  Last year, the European hops harvest failed.  At the same time, hops growers and perhaps some malt growers, seduced by subsidies, have been switching to corn to produce ethanol.  The combined effect of a bad hops harvest and the growth of ethanol production have made it difficult for a breweries to find the raw materials needed to brew beer. 

The net result of all these factors is a considerable growth in beer prices.  I predict that the craft beer phenomenon is here to stay–even if malt and hops might drive some small breweries out of business, now the big companies are vying for first place in craft beer production (led by Samuel Adams).  Metal prices will continue to go up, and so long as the ethanol fad continues and government interferes through subsidies, we can expect that malt and hops will continue to become rare.  The trends indicate that the price of beer will continue to go up and the best place to invest is in the craft beer industry or such companies that are adjusting well to this phenomenon.

 Dec. 2007-The Economist: Trouble Brewing

Dec. 2007-Sky News: Beer Industry Warns of the 4 pound Pint

July 2007-Scrap Metal Prices Up . . . Along With Beer Keg Thefts