There’s a lot of change coming in 2023
Firstly, there’s hops.
Hop contracts, don’t work for smaller breweries or in such a turbulent and changing market. How can you contract for hops if you don’t know what you’re going to be brewing?
The pandemic left a lot of breweries with contracted hops sitting in warehouses, so they’re still using some of those, and have reduced or cancelled contracts for last year and this year.
With so many new hops coming to market, people are trying new ones as is ever the case.
And with prices going up brewers are looking at ways of using less hops or replacing them with oils.
All of this screws over the growers who, without the contracts, don’t know what to grow. Hops aren’t like potatoes, you don’t plant them one year and harvest them the next, the plants take at least three years to mature.
But is this the fault of the brewers, or do the hop growers need to change their practices? Do they need to take the risk growing some hops that might not sell, in the same way that brewers make some beer that might not sell?
Because of this current situation there are no East Kent Goldings hops on the spot market this year. The only breweries that have got some have them on contract. Pretty risk free for the growers. However this means that a lot of breweries that previously would pick them up on the spot market because they either didn’t use much of them, or didn’t know what they’d be brewing with them, will now look at alternatives. And if those alternatives work, they’ll stick with them leading to even less of a call for the hop, and less acreage planted.
I can’t help but think that by not taking the chance on spot market sales, hop growers are shooting themselves in the foot. But I’m not a hop grower so I can’t comment from their side.
There may be a bit of hope though, there are smaller hop farms selling direct to breweries now, and homebrew suppliers like Get ‘Er Brewed and The Malt Miller are selling hops in micro-brewery quantities. Even some hop factors are now selling in smaller quantities themselves. So if the hops aren’t available on the spot market, they might be available through these mini-factors. There’s still the risk of not getting the hops you want, but while these suppliers take the risk in contracting the hops there’s the chance that we can also get them.
And then there’s the malt.
Malt prices have gone up a lot; and are going up again. Whilst we grow a lot of grain in the UK, the more specialist stuff comes in from the continent, and they’ve not had a great harvest. So the amount of grain available has dropped, driving up the price. And the cost of growing it has gone up too, you don’t just open a sack of seeds and throw them into the wind. Fertilizer, vehicle fuel, packaging, everything involved in commercial agriculture has gone up in cost. And once the grain is grown and harvested it needs malting and kilning, which takes energy.
I’m already seeing some beers using extra pale malt as their base, it uses the least firing of the kiln, so is the cheapest to process – maybe only by pennies, but they’re all counting now. Extra pale malt also allows any adjunct malts to come through more, meaning less are needed for flavouring. Same goes for hops. The downside to this though is that without the bigger malty backbone the beers won’t last as long. So we’re likely to see more Drink Fresh around.
Apart from the cost of malt, but very much to do with it, another conversation that’s starting to bubble around the industry at the moment is extraction. How much fermentable sugar can we get from the grain? The higher the rate of extraction, the less malt that’s needed to reach the same strength of beer. Less malt, less costs. So brewers are looking at ways of increasing the efficiency of their kits, from longer mash times and giving it all a Big Stir, to specialist enzyme additions. Lots of tricks that homebrewers with their less efficient kits use, but all this has to be balanced out with the costs involved in changing processes; after all the enzyme additions aren’t free.
Given these aspect, I don’t think we’re going to see the Malt Forward Revolution that has been predicted for the last few years as hop prices have gone up and availability has gone down, because the price of malt itself is soaring.
With malt prices going up, several breweries are looking at producing lower strength beers. Before the Craft Beer Revolution™ most beers seemed to be between 3.8% and 4.5% and it seems that we’re headed back that way. They won’t be as cheap as they were back then, and we’re likely to see a 4% beer costing what you’d have paid for a 5% beer just a couple of years ago but at least you’ll be able to get a pint. 6% plus beers will likely become rarer, and a treat.
The flip side of this is that we’re very likely to see much more experimentation at the lower end, especially the low/no market. Previously the only breweries that could afford to make non-alcoholic beer were those that could invest in some Very Expensive Kit that allowed them to remove the alcohol once the beer was brewed. But recently Muntons have been promoting an Alcohol Free Malt Extract. You boil it up with your normal bittering and late addition hops, then cool it down, carbonate and package it. So far feedback seems to be very good for it and it puts the production of alcohol free beers into the hands of smaller brewers up and down the country. I’m not sure how well HMRC will like this as there’s no Duty on beer below 1.2% abv. Their loss here may well be offset to some degree by the planned 12.3% rise in Duty in February, although we’ve not actually heard from HMRC that this is actually happening, or what the rise will actually be. And considering that’s next month it leaves planning a brew schedule to be rather difficult when you don’t know how much it’s going to cost.
Cutting production costs really seems to be the main focus of a lot of breweries at the moment, and will likely continue to be throughout the year. One of the main costs outside of the beer itself, is rent. And that’s going up too. What we’re starting to see from this though is an increase of shared production space, and equipment. A lot of the time brewing equipment sits idle. Takes half a day to brew a beer, and then a week or more in the fermenter. Even with several fermenters the brewing equipment sits around. Have another brewery move their fermenters in, sell off their brewing kit, and use the money to help share the rent, and it’s a win-win situation. Or rather you’re back to where you were three years ago costs wise. You might not have your own brewery anymore, but at least you’re still trading. We’re likely to see more and more of this along with contract brewing and orphan brands (a term I’ve just invented for those breweries who’ve been saved, with just the brewery closing and the people losing their jobs, but at least the beer is still available brewed elsewhere). I do still wish for more transparency in brewing. I hate the term “brands” and wish that the brewery who produces the beer is listed clearly on the pump clips and labels. Doesn’t seem too much to ask for.
Over the next year we’re likely to see more smaller operations. Breweries sharing space and (finally) purchasing power. Especially with the changes to beer Duty due in October.
For the last several years medium sized breweries (funded by the multinationals) campaigned and lobbied government for changes to Small Brewers Relief, allowing them to get a tax cut – at the expense of the smaller breweries who’d get less of a relief. I’ve covered this a lot over the years. What’s happened though is that the smallest of the breweries are likely to pay less Duty, and the very small operations of 1bbl or less may end up not having to pay any Duty at all. I’ll cover this in a future piece. So as we see breweries scale back production they may end up paying less Duty than before, even with the rise due in February. If these hyper-local focussed brewers are able to find the right premises, likely shared with other breweries or in a pub’s old kitchen or disused function room, then there is a good chance that we’ll see the return of more affordable beer. But whilst that’s not likely until the end of the year I wouldn’t be surprised to see a lot of new smaller breweries starting up and finding their feet ahead of that.
I’ve not touched on the issues of route to market, that’s a whole other blog piece in the writing
So overall as we go into 2023, it’s still a rollercoaster of an industry unable to plan for the future. People still can’t afford to buy beer, and breweries are struggling to afford to make it. But there is hope.