USA: Brewing industry still facing higher costs for key inputs

The brewing industry is still facing higher costs for key inputs, such as packaging and carbon dioxide, and that has beer makers concerned, Yahoo Finance reported on November 20.

The cost of carbon dioxide alone rose 28% year-over-year in October, according to the latest Producer Price Index (PPI) data. While prices for the key beer ingredient did come down slightly month-over-month, the CO2 shortage hasn't yet abated.

"We can't make beer without CO2," Denver Beer Co. Co-Founder Patrick Crawford told Yahoo Finance in late September. "It is one of our main ingredients, right after barley, water, and hops."

Beer, food, and beverage distributors are all finding themselves in the same predicament as they compete for a scarce supply of the gas necessary to process and preserve their products.

Experts cite industrial plant shutdowns, supply chain slowdowns, and even contamination in a volcano's natural supply of carbon dioxide as reasons for the shortage. Strong demand for bubbly beverages in summer has also contributed to the tight supply.

This isn't the first time the brewers were forced to pivot this year. The industry has had to maneuver heightened material costs and aluminum shortages that took hold during the pandemic but accelerated in 2022.

That has meant higher prices for consumers, too.

"The price of cans have gone up 15%-20%, price of our barley just went up another 27% this year," Crawford said. "So we have had to do a price increase to make sure that we protect our margins and we're still a profitable company... almost all of our inputs have gone up, and we have had to adjust price accordingly."

The Denver Beer Co. has looked to other solutions to ease carbon dioxide costs, including within its own processes.

"It's really funny, CO2 is a byproduct of our fermentation while we're making the beer that gets released into the atmosphere," Crawford said, explaining the brewery's CO2 capturing system. "And then we capture that CO2 and put it back into the beer at the end of the fermentation to top it off and make sure everyone's beer is nice and bubbly when they get it."

But smaller, local breweries are at the biggest disadvantage when it comes to high input costs. One reason is that carbon capture rigs can be costly, with prices starting around $90,000, according to Good Beer Hunting.

CO2 suppliers have also become selective in taking on new clients, and cost-cutting alternatives like nitrogen can completely alter the taste of beers.

As the demand for carbon dioxide squeezes various industries, the Denver Beer Co. is looking to expand its carbon dioxide capturing business. For that, the company may find itself at the right place and time.

"It takes carbon dioxide to grow plants, and we make more of it than we can use," Crawford said on cross-industry cooperation. "We can figure out how to capture it, package it, and sell it to the dispensaries or to the weed grow operations here in Colorado, and we did a trial with that. We ran it for about six months, and it worked great."

Carbon dioxide recycling falls in line with Denver Beer Co.'s overall mission of sustainability — the brewery claims its company's carbon capture system is able to collect 100,000 pounds of carbon dioxide each year and keep it from entering the atmosphere.

The company, like other craft beer makers focused on the environment, also runs its primary brewing facility on 100% solar-powered energy.

And in April 2021, Crawford and the brewery's other co-founder, Charlie Berger, purchased a small EV fleet for their sales team, projecting to cut down on as much as 13.8 metric tons of carbon emissions. Denver Beer Co.'s carbon capture system reportedly collects 100,000 pounds of carbon dioxide each year since its installation.

"This has been a big win-win for us," Crawford said about the sustainability efforts. With federal and state tax credits and incentives, "it's paid back in less than five years, and it's good for the environment."

22 November, 2022